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Presented by Patricia MalaveSenior Loan Advisor

Financial Aid

A rise in defaults. About 5 million federal loan borrowers are in default (meaning they have failed to make payments for 270 days or more) and 850,000 private loans are in default. In total, this adds up to about $67 billion of defaulted student loans. To help collect payments from students who havedefaulted on their federal loans, the Education Department has started hiring private debt‐collection companies.

Of the 37 million borrowers who have outstanding student loan balances 14.4 percent have at least one past‐due student loan account. Together, these balances come to $85 billion, or roughly 10 percent of the total outstanding student loan balance.

Of all the higher education students, community college students are the least likely to take out student loans. Only about 17% of community college students borrow money to attend college, compared with 48% of students who attend four year institutions and 71% of students who attend private, for-profit institutions, according to the U.S. Department of Education data.

But here’s the hitch: Though less likely to borrow, community college students are more likely to default. The U.S. Department of Education estimates that 20% of community college students default on their student loan obligations, compared with 14.7% of all student loan borrowers, and that is rising.Pell grant recipients are more likely to default on student loans than other students.Completion is another factor. Analysis suggests that students who don’t complete don’t pay.

Students who complete fewer than 15 credits are far less likely to pay back their loans than those borrowers who complete a full semester. The odds that a student will pay back a loan are even lower if the student leaves college mid-semester.Borrowers who left school without a credential, last borrowed after attending one year of college or less, attended a public two-year or for profit-institution, were far more likely than their counterparts to become delinquent or default during the first five years of repayment.

We are concerned about our students and believe that it is critical that we establish a clear rationale for student loan eligibility to complete their education, and that students who do not intend to go beyond the community college level will not be overly burdened by debt. For most community college students, loans in addition to other financial assistance are not recommended. If students need additional loans when they are receiving a fee waiver and grant assistance, they will almost certainly need to continue to borrow when they transfer.

Borrower Eligibility Direct Loan Subsidized Loan Subsidy rules for new borrowers Unsubsidized Loan Entrance Counseling Requirement Exit Counseling Requirement Unmet Need Repayment Repayment Plans

Completed a 2014/2015 FAFSA application Satisfied the student aid financial aid eligibility

requirement Be enrolled and attending a minimum of six units

per semester in a program leading to a degree or certificate at Rio Hondo College and/or transfer to a university.

Have received a 2014/2015 Award Email or a email stating you are ineligible for any need-based aid.

Attend a Loan Workshop Complete Loan Request Form and Financial literacy

form and submit to the Office of Financial Aid by established deadline dates.

**Continuing Borrowers must attach a printout of your past loan history from www.nslds.ed.gov **

Complete MPN (Master Promissory Note) You must not be in delinquent or in default on any

Federal Student Loan or owe a refund on Federal/State grant.

Comply with Entrance and Exit Loan Counseling requirements

After first disbursement complete the Exit Loan Counseling

Met and maintain good Satisfactory Academic Progress as determined by Rio Hondo.

Note: Typical processing time for Direct Loans is 4-5 weeks after all requested loan information has been received.

Direct Loans are low interest loans to students to help pay for the cost of a student’s education after high school. The lender is the U.S. Department of Education rather than a bank or other financial institution. Rio Hondo only participates in the Direct Loan Program.

Interest rate is 4.66%for subsidized loans first disbursed between 7/1/14 and 6/30/15

Interest rate for unsubsidized loans is 4.66%

Interest rate is determined by Congress

Awarded on the basis of financial need

You won’t be charged any interest until:

1.You graduate 2.Drop below 6 units or 3.Reach your maximum subsidy eligibility.

Because the federal government subsidized the interest during the time you are enrolled in school.

Limits subsidy period to 150% of program length

Intended to encourage students to complete programs in a timely manner

Borrowers lose eligibility for interest subsidies when:They have reached the 150% of the allowable subsidized usage period AND

They did not complete the program ANDThey continue at least half time

enrollment in that program ORThey enroll in a new program of equal or

lesser program length

New borrowers on or after July 1, 2013 Borrowers with no outstanding Stafford,

PLUS or Consolidation loans on or after July 1, 2013

If student has existing Subsidized loan that was borrowed before July 1,2013 this will not affect them.

If borrower exceeds maximum eligibility period (MEP):Borrower may not borrow additional subsidized Stafford LoansInterest will accrue on existing loans beginning on day borrower exceeds MEP and will continue to accrue during:Grace periodsDeferment periodsIn-school periods

Borrower loses:Eligibility for new subsidized Stafford loansEligibility for further subsidy on existing loansBorrower responsible for interest regardless of further borrowing

-Lost subsidies cannot be recapturedLoans that lose subsidy eligibility remain Subsidized Stafford loans

1. Student enrolls in 2 year program he is eligible for 3 years of Subsidized loans (2yr plus 1yr =3yr)He does not borrow any Direct loan for the first year of his program. He is still eligible for 3 years of Subsidized loans for the remaining program.

2. Student enrolls in 4 year program she is eligible for 6 years of Subsidized loans.(4yr plus 2yr =6yr)She borrows a subsidized loan for the first academic year but does not borrow a subsidized loan for the second year. At the beginning of the third year she still has 5 years worth of eligibility remaining to complete her 4 year program.

3. Student enrolls in a 4 year program, he is eligible for 6 years of subsidized loans. He borrows all 4 years but doesn’t complete his program. He has 2 years left for subsidized loans.

He transfers to another 4 year program. He borrows again for the full 4 years. After the 6th year, interest will begin accruing whether he is finished with school program.

Interest is charged from the time the money is first disbursed until it is paid in full. The interest is capitalized when you enter repayment, meaning that you pay interest on any interest that has already accrued (accumulated).

Minimize accrued interest by paying interest as it accumulates.

IF YOU ARE A DEPENDENT STUDENT YOU CANNOT RECEIVE THIS TYPE OF LOAN

**If you still have several years until you receive your degree, this type of loan is not recommended.

You must complete the Entrance Loan Counseling online before submitting your loan request form.

This will ensure that you understand your rights and responsibilities as a student loan borrower. Website is in the loan packet.

Must go to the National Student Loan Data System at www.nslds.ed.gov and attach a printout of past loan activity with your Loan Request form.

This must be completed online after you receive your first disbursement and before your second disbursement. Failure to complete your Exit Counseling will delay or cancel your second disbursement.

The Master Promissory Note is a legal document in which you promise to repay your loan(s) and any accrued interest and fees to the US Department of Education. It also explains the terms and conditions of your student loan(s).

This MUST be completed before any loan disbursements.

Independent First year students (29 units or less) may be eligible for $3500 Subsidized Loan and $6000 Unsubsidized Loan depending on your unmet need.

Independent Second year students (30 units or more) may be eligible for $4500 Subsidized Loan and $6000 Unsubsidized Loan depending on your unmet need.

Dependent students are not eligible for Unsubsidized Loans.

Loans cannot exceed your unmet need. If you selected Maximum Amount, Processor

will reduce the Unsubsidized loan amount first before reducing the Subsidized loan until it is below your unmet need amount.

Student John Smith:

Budget $17,951EFC 0Need $17,951Awards (grant, bogg) - $7,495

=$10,456 Unmet NeedLoan RequestMaximum Sub $4500Maximum Unsub + $6000

=$10,500

Exceeds unmet need by $44Processor will reduce Unsubsidized loan amount by $50Leaving Unmet Need of $6

Student Jane Smith:

Budget $17,955EFC 4,463Gross Need 13,496Awards (grant Bogg) – 3,045Unmet Need =$10,447Loan RequestMaximum Subsidized - $3,500 =$6,947 Unmet Need

Understanding the repayment process for your federal student loans can go a long way toward building a solid financial foundation.

Remember, federal student loans are real loans, just like car loans or mortgages. You must repay a student loan even if your financial circumstances become difficult. Your student loans cannot be canceled because you didn’t get the education or job you expected, or because you didn’t complete your education (unless you couldn’t complete your education because your school closed).

Grace Period is six months from: Graduation date Leave School Drop below half-time status

**Remember you are being charged interest during this time**

Your loan servicer will give you a loan repayment schedule that states when your first payment is due, number and frequency of payments and the amount of payment.

It is YOUR responsibility to update any address changes with your loan servicer.

Note: You’re responsible for beginning repayment on time even if you don’t receive this information. Failing to make payments on your loan can result in default.

Standard Repayment Plan

Graduated Repayment Plan

Fixed Monthly payments for up to 10 years.

Payments that start off lower at first and then gradually increase usually every 2 years. The loan must be paid in 10 years.

Income-Contingent Repayment (ICR) PlanYour monthly payment is adjusted each year based on your annual income (and your spouse’s income if married), your family size, and the total amount of your Direct Loans. After 25 years, any unpaid loan amount will be forgiven.

Income-Based Repayment (IBR) PlanYour monthly payment is capped at an amount that is affordable based on your income and family size. You are eligible to repay under the IBR if your calculated IBR payment is less than what you would have to pay under the 10-year Standard Repayment Plan. If you repay under the IBR for 25 years and meet other requirements, any remaining balance of your loan(s) may be cancelled.

If your loans goes into default after 270 days of non-payment, your credit rating is affected negatively. You may be denied future education or consumer loans, and you may not be able, for example, to obtain a mortgage, rent an apartment, buy a car, or secure employment. If you are struggling to make the scheduled payments contact your lender to discuss alternate repayment plans

If you don’t make a payment on time or if you start missing payments-even one- your loan is considered delinquent and late fees can be assessed.

If you are missing or making late or partial payments contact your loan servicer immediately for help.

Dept of Ed will require you to immediately repay the entire unpaid amount of your loan. Dept of Ed may sue you, take all or part of your federal and state tax refunds and other federal or state payments, and/or garnish your wages so that your employer is required to send us part of your salary to pay off your loan. Dept of Ed will require you to pay reasonable collection fees and costs, plus court costs and attorney fees. You may be denied a professional license. You will lose eligibility for other federal student aid and assistance under most federal benefit programs. You will lose eligibility for loan deferments. Your default will be reported to national consumer reporting agencies (credit bureaus).

Loans must be repaid with accrued interest Loans are to be used for educationally related

expenses Borrow only what you need Keep track of how much you are borrowing There is a maximum eligibility for borrowing

subsidized loans Don’t ignore debt. It won’t go away If you don’t make any payments after 270 days

your loan goes into default. Be aware of earning potential and whether you

will be able to repay loans before borrowing.